WASHINGTON, May 6 (Reuters) - U.S. stock prices remain “elevated” and business debt is at historic levels, but the financial system overall “appears resilient” with low levels of leverage and less susceptibility to risks of a destabilizing run, the Federal Reserve said in its latest report on financial stability.
“Investor appetite for risk appears elevated by several measures, and the debt loads of businesses are historically high,” the Fed said on Monday in a report that noted the 20 percent growth in leveraged loans between the start of last year and this year, and other aspects of corporate debt.
The ratio of debt to assets among publicly traded, nonfinancial firms is near a 20-year high, and the share of new loans going to the most indebted companies is near peaks reached in 2014 and just before the 2007 to 2009 financial crisis.
While the Fed sees the system overall as healthy, the levels of corporate debt stand out, said Fed Governor Lael Brainard.
“With financial volatility easing since the end of last year, the Federal Reserve Board’s Financial Stability Report suggests stretched asset valuations and risky corporate debt merit continued vigilance against a backdrop of low- to moderate- vulnerabilities in the household and banking sectors,” Brainard said in an emailed statement.
Reporting by Howard Schneider; Editing by Andrea Ricci